Scarcity: Why Having Too Little Means So Much by Sendhil Mullainathan and Eldar Shafir – review
A study showing how poverty impairs judgment has far-reaching implications
People crouch to collect leftover vegetables in Athens: ‘scarcity of all kinds remodels patterns of thinking’. Photograph: Bloomberg/Getty Images
Saturday 7 September 2013 15.00 BST
In a world increasingly polarised by wealth, the efforts to find a metaphor that unifies rich and poor, a shared humanity, if you like, has become both a lucrative and a slightly desperate publishing enterprise. Most of the academic traffic is concentrated at the busy crossroads between economics and psychology, where a nudge is as good as a blink. The idea that we are defined by and subject to market forces is taken as a given in this work; the interest lies in the gap between the economist’s faith in rational decision-making and the psychologist’s stacked-up evidence of our less than rational behaviours: in the exposure of our almost comical inability to understand risk and reward and to do what is best for us.
This gap was first comprehensively explored in the pioneering work of Daniel Kahneman and the late Amos Tversky, through their Nobel-prize winning analysis of how man (and woman, but mainly man) is anything but a creature of logic in market places of all kinds. Kahneman’s recent bestselling precis of his life’s work, Thinking, Fast and Slow, was a catalogue of examples of people using the wrong kind of analysis when confronting pivotal problems: relying on instinct when precise weighing of probabilities would be crucial, and vice versa. The seductive tone of Kahneman’s writing comes in part from his understanding that no one is exempt from these failings. When I interviewed him about his ideas, he observed that the most useful subject for his study of internal biases and wonky reasoning had always been himself. Though he spent a lifetime proving the fundamental weakness of human beings in predicting the outcomes of any relatively complex choice, it happily didn’t stop him making all sorts of errors of judgment in his own life.
Scarcity, the latest of the post-Kahneman adventures into this behaviourist world, comes with a quoted tribute from the master: “the finest combination of heart and head that I have seen in our field”. Some of that dichotomy is a result of this book being a collaboration between another distinguished double act: a Harvard economist and a Princeton psychologist. The duetting professors present their adventures in metaphor as a kind of quest, though it is not always clear who is Quixote and who Sancho Panza. Their journey begins with the sort of revelation common to all such quests, a leap from the personal to the universal. The hypothesis to be tested is this: do the patterns of behaviour they themselves show when under deadline pressure in busy academic lives bear relation to those displayed by those billions of people in the world struggling to survive on minimal resources? In other words, do the stressed-out time-poor of the west have common cause with the actual dollar-a-day poor of the developing world? If they do, it is Mullainathan and Shafir’s contention that the link between these two states is “scarcity”.
If that link sounds tendentious, or even arrogant, then the American professors have no end of smart studies to back it up. It is, to begin with, their provable belief that “scarcity captures the mind”, and it doesn’t matter whether the absent resource is time or food or money. Some of this understanding is not new: a 1946 study of hunger (prompted by a need to understand and feed Europe’s starving after the war) among American volunteers revealed not only the obvious – that, faced with starvation, food of any kind would be eaten and plates licked clean – but also that the brain was hijacked entirely by this need. The subjects of the study who watched movies were interested only in the scenes in which food was mentioned; when they talked they made plans to open restaurants or become farmers when the study was ended; they hoarded cookbooks.
Further studies show this preoccupation to occur in far less extreme circumstances. In one experiment, a group is divided into those who’d had lunch, and those who hadn’t eaten since breakfast. Both sets watched words flashed very quickly – at one-thirtieth of a second – on a screen. The hungry cohort identified as many of the words as the others except in one instance – they were far more likely to identify the word “cake” than their fully fed peers. From such findings the authors begin to count the ways in which scarcity of all kinds – sleep, security, time, food, money – remodels patterns of thinking. Sometimes the results are counterintuitive. Thus, the lonely and isolated are far more alive to the nuances of facial gesture than the popular and sociable. Sometimes the “tunnelling” of vision is more creative: as any artist or writer will confirm, an unmissable deadline will focus the mind like nothing else. But always, the authors observe, such narrowing comes at a price.
The cost is an undue focus on the necessity at hand, which leads to a lack of curiosity about wider issues, and an inability to imagine longer-term consequences. The effect of this scarcity-generated “loss of bandwidth” has catastrophic results in particular in relation to money. While the poor have a much sharper idea of value and cost, an obsessive concentration on where the next dollar is coming from leads not only to poor judgment, a lessened ability to make rational choices or see a bigger picture, but also to a diminishing of intelligence (even “feeling poor” lowers IQ by the same amount as a night without sleep), as well as a lowering of resistance to self-destructive temptation.
This “scarcity trap” provides an explanation for unpalatable truths, the authors argue. It shows why the “poor are more likely to be obese… Less likely to send their children to school… [why] the poorest in a village are the ones least likely to wash their hands or treat their water before drinking it.” And the explanation is this: “the poor are not just short of cash. They are short on bandwidth.” When an individual – any individual – is primed to think about his money troubles, his ability to perform tests and tasks is measurably reduced. Reminded that they are poor, individuals “showed less flexible intelligence, less executive control. With scarcity on his mind, he simply had less mind for everything else.”
The implications of such findings, that poverty of all kinds literally reduces imagination and the ability to shape one’s own life, are presented as somewhat revolutionary. As antidotes the authors suggest a series of nudge-like interventions to “create bandwidth” – for the time-poor these can be as simple as setting up direct debits, for the cash-poor it might involve providing some kind of insurance against “small shocks”, (a puncture, a sick cow, a rent rise) that can lead to moneylenders and loan sharks, or providing regular working days rather than the debilitating stress of zero-hours contracts. Such solutions are hardly news. Neither, you imagine, will the fact that pressing need limits long-term perspective and self-control come as a shock to anyone but the idle rich (and the government). Though the book lacks the killer anecdotal “stickiness” of a Malcolm Gladwell or a Kahneman, Scarcity does give scientific rigour to our instinctive understanding of the effect of privation (and austerity) on the brain – which alone should make it essential reading for policy-makers everywhere.
Sendhil Mullainathan (Harvard)
Eldar Shafir (Princeton)